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The Key Takeaways
- Carvana shares fell on the second day of a two-day streak after Hindenburg Research revealed a shorting position.
- However, JPMorgan analysts said their own research into Carvana hasn't revealed any "red flags."
- Analysts said that the concerns about loan defaults in the auto industry are not new, and there is a strong demand for used vehicles.
Carvana shares (CVNA), which are shorted by Hindenburg Research, continued to fall Friday. JPMorgan analysts however, remained firm in their position. “overweight” Contact the retailer of used vehicles.
JPMorgan said that their own Carvana Research was published on Friday. “has not suggested any red flags" regarding the company.
The Hindenburg report sounded alarm bells about the company’s gross profit per unit and practice of selling consumer auto loans to third parties. Specifically, the hedge fund claimed to have uncovered $800 million in loan sales to an unidentified “Related Third Party” and said that nearly 26% of the company’s gross profit over the past nine months was due to such loan sales.
JPMorgan Doesn't See Carvana Reporting as 'Inflated'
JPMorgan wrote in a letter that CVNA “can provide greater disclosure”.” but said the issues around auto-industry loan defaults aren’t new and that demand for used cars remains strong.
“We see CVNA’s reported economics not as inflated.”
Carvana shares rose 5% intraday on Friday, after falling 2% the previous day. The company’s shares have, however, nearly quadrupled in value in 2024—a huge turnaround after bankruptcy concerns hurt the company’s share price in previous years.
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